Serious tax evasion cases have jumped 8% this year as the tax authority faces pressure to crack down. The 8% rise represents an extra crop of 3,000 cases referred for specialist investigation.
According to law firm Pinsent Masons, HMRC is keen to be seen stepping up its enforcement activity. HMRC’s vigour comes after the ‘Panama Papers’ scandal and persistent criticism of its handling of tax evasion allegations at HSBC’s Swiss banking arm.
“Headline-hitting exposés like the Panama Papers leak and the HSBC Swiss banking scandal highlight that sheltering wealth from the taxman, remains an extremely highly-charged issue,” said Fiona Fernie, head of Pinsent Masons’ tax investigations.
The crackdown is also exacerbated by an increased blurring of the lines between avoidance and evasion, according to Fernie.
For Fernie, it’s a worrying development: “The attitude of government and the general media seems to be that avoidance is equally as heinous as evasion when it clearly isn’t,” she told AccountingWEB. “It’s a real problem when people are asked to work out the morality or otherwise of a scheme, and there’s increasing pressure on individuals to figure out whether what they’re investing in is morally okay. And that’s not a good way forward.”
HMRC’s big push is being enabled by the recent addition of some potent weaponry to its arsenal.
“There are new rules like the corporate failure to prevent evasion. There’s also strict liability,” said Fernie.
“If you don’t disclose a foreign bank account the Revenue doesn’t have to prove that you intended to not disclose to find you guilty.” The implication is, she said, that it will become much easier for the taxman to prosecute.
“Similarly, a corporate at, say, a trustee company can have lots of clients who have offshore affairs. They have to prove they’ve got the adequate controls and procedures in place to stop a member of staff from facilitating that kind of evasion, in order to avoid criminal guilt themselves.
“There will be fines equivalent to the amount of tax lost for those who aid evasion.”
Another key development is the deployment of the common reporting standard (CRS) in 2017. “When the reporting starts under those regimes, the Revenue will have access to a huge amount of information on offshore accounts,” said Fernie.
Any data captured will be filtered into HMRC’s state-of-the-art analytical system called Connect. “This huge data mining computer can make connections very quickly, compared to the past where it would’ve taken an individual months.”
The best thing to do now, according to Fernie, is to play it very safe. Fernie advises closely analysing any client with complex tax affairs. “With the revenue’s increased capabilities, they will be able zoom in on many more taxpayers than in the past.
“If you discover you’ve got something wrong, particularly with offences to require correction with anything you find something wrong. It’s better to just come forward.”